China Is Killing Volkswagen, and Rivian Will Suffer Next

Key Points:

• China’s EV Dominance: Chinese EV companies are pushing Volkswagen out of the market, adding to their global struggles.
• Declining Sales: VW is facing challenges in both Europe and the US, with their main brand struggling.
• Rivian Funding Risk: Volkswagen’s financial issues could jeopardize their $5 billion commitment to Rivian.
• Though EV companies have some struggles and challenges, investors have already identified “The Next Nvidia.” See what all the excitement is about by clicking here now.

Lee and Doug discussed the significant challenges Volkswagen faces, particularly in China, where homegrown EV companies are overtaking Western and Japanese manufacturers, affecting VW’s profitability. They highlighted how Volkswagen’s weak presence in the U.S. market, combined with the struggles in China and Europe, leaves the company in a precarious position. The conversation also touched on the potential impact on Rivian (NASDAQ: RIVN), with doubts about whether Volkswagen will fulfill its $5 billion funding commitment to the EV company due to its financial strains in Europe and challenges in the EV market.

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Edited Video Transcript:

And Volkswagen has another problem.

They have a big problem here.

China.

China.

All the manufacturers, Western manufacturers and Japanese and even South Koreans are now facing the fact that after China being an incredibly profitable market, that the homegrown EV companies are literally pushing them into the ocean, which means that if you are a manufacturer from one of those two geographies.

If you include Korea three.

You’ve lost a huge amount of your bottom line.

So that means Volkswagen has a problem in China.

The second largest car market, which is in the United States, nobody buys a Volkswagen.

A Volkswagen is like a Fiat or something.

The VW sales in the United States are close to zero compared to the larger car.

They’re probably more than Fiat, but less than, say, Subaru.

But what it means is, is that Volkswagen is also sort of trapped in Europe.

It’s not like Volkswagen’s management can say, well, we’re strong in China.

We’re strong in the U.S.

So the fact that we’re having trouble in Europe, we can handle.

They cannot handle trouble in Europe.

And they can’t live on the luxury stuff.

You just can’t live on Porsche and the other brands that they have.

That’s not the bread and butter for VW.

It’s not enough.

You take Audi and Porsche, which are the largest of their two luxury brands.

You don’t have enough unit sales with those to make up for the problem that you’re going to have.

Lower sales with the flagship brand, which is Volkswagen.

And as you look at this, the United States is not comparable.

It’s not as if there’s some law that says that U.S. car companies have to manufacture more EVs.

At one point, the Biden administration, I think, did lay down a rule, but I don’t think that’s something that they could enforce.

But you can see the same kind of thing creeping into the United States.

Ford and General Motors have made these investments in EVs that are in the tens of billions of dollars.

And now what they’re finding out is everybody’s coming and buying gas-powered cars.

So they can’t take that opportunity.

Manufacturing costs and facility out of their expenses, that has to stay in.

Now they’ve gone into the EV business.

So what they have is they have two huge cost structures.

One was supposed to be great.

It turned out to be crummy.

The other one was supposed to go away, and it’s awesome.

People want gas-powered cars.

Yeah, you’re right.

And there’s something else that looms very, very big here.

And that’s where our friends at Rivian come in, because the pledge initially from Volkswagen was over a period of time, there would be five billion dollars of funding.

Well, there was an upfront pledge of a billion, as I’m pretty sure.

But if they’re having to close plants, and they’re cash tight on production in Europe, do you think they’re going to fully fund Rivian when their basic problem is electrical vehicles?

I think that funding could be in big trouble.

No, no.

That’s right.

Like, oh, yeah, I want to put more money into electric vehicles while we’re not selling any.

No.

I’ll bet you any money that at one juncture in the not too distant future, VW says, sorry, we can’t fulfill that commitment.

We have problems in Europe.

And number two, you know, Rivian, who will continue to run out of money, will have to go to somebody else.

Maybe their pals at Amazon.

But I don’t think that those guys want to be in the EV business.

So what happens?

Are they, you know, are they a dead man walking sort of situation?

Yes, they are.

You don’t need to go any further.

The answer to that is probably not.

Yes.

But I think the clearest sign, you know, because we’ve had people push back against us on this, you know, that Rivian’s somewhat doomed because, oh, they’re going to get all this money from VW.

Well, VW is closing plants.

So I can’t believe that they’re looking to put five billion into a company that doesn’t sell many cars despite their contracts with Amazon.

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